Dow tumbles 600 points as strong jobs report likely to put brakes on Fed rate-cutting: Live updates

Stocks tumbled Friday after a hot jobs report dampened Wall Street’s expectations for more interest rate cuts from the Federal Reserve this year.

The Dow Jones Industrial Average traded 638 points lower, or 1.5%. The S&P 500 shed about 1.5%, while the Nasdaq Composite lost 1.6%. Friday’s losses pushed the major benchmarks into the red for 2025.

U.S. payrolls grew by 256,000 in December, while economists polled by Dow Jones expected to see an increase of 155,000. The unemployment rate, which was projected to remain at 4.2%, fell to 4.1% during the month. The yield on the 10-year Treasury note spiked to its highest level since late 2023 after the report.

“Good news for the economy but not for the markets, at least for now,” said Wells Fargo Investment Institute senior global market strategist Scott Wren. “However, this unexpected gain relative to the consensus projection does not change our view that the labor market is likely to decelerate further in coming quarters.”

Traders give 97% odds that the Fed stands pat on rates at its meeting later in January, and now believe the central bank will hold rates where they are in the March meeting as well, based on fed funds futures trading.

Odds of a March cut fell to around 25% following the jobs data, down from 41% odds a day earlier, according to the CME Fedwatch tool. The Fed cut its benchmark rate by a quarter point in December.

Stocks took another leg lower on Friday after The University of Michigan’s consumer sentiment index signaled concern on the inflation front. The overall index came in at 73.2 for January, missing a Dow Jones estimate of 74. Part of that was driven by one-year inflation expectations rising to 3.3% from 2.8%. Five-year expectations also scaled to their highest level since June 2008.

Growth stocks that could be hurt the most if a spike in rates causes investors to get more conservative led the session’s losses. Nvidia shed 3%, and Palantir was off by more than 3.5%.

Small cap stocks, also sensitive to borrowing rates, dropped with the Russell 2000 index losing more than 2%.

“Rates are moving a little bit too much, too fast and equity markets are selling off,” LPL Financial chief technical strategist Adam Turnquist said, adding that the recent move in yields foreshadows a potential pullback or correction for the S&P 500.

“But the important thing that gets lost on days like today is the message of why rates are moving higher — it’s because the economy is doing better than expected,” he said. “Ultimately, that means the potential for better earnings, less risk of a recession, and that’s really going to dictate longer term returns versus a sell-off in today’s market.”

All three of the major averages are on track for weekly losses, with the S&P 500 off 1.8% and the Nasdaq Composite down 2.4%. The 30-stock Dow is on pace for a 1.6% decline on the week.